How to hunt for missing, unknown life insurance policies
Payouts aren’t automatic when a loved one dies
As we mourn the high-profile recent deaths of soul icon Aretha Franklin and Arizona Sen. John McCain, it’s not a bad time to put a spotlight on dreaded topics such as end-of-life paperwork.
You might think no one could lose track of a life insurance policy. Think again. At one point, it was estimated that at least $10 billion in life insurance policies nationwide had gone unclaimed or unpaid.
Several years ago, life insurers faced tough scrutiny from state regulators in California, Florida and elsewhere for the failure to pay death benefits because it is up to the beneficiaries to file a claim following a death.
But how do you file a claim if you don’t know if there’s a policy?
Florida regulators maintained that life insurance companies were not taking adequate steps to try to pay up when some information was available but no life insurance claim had been filed. Insurers would use information from the Social Security Administration’s Death Master File to stop paying a deceased person’s annuity but not use similar information to search for beneficiaries of a life insurance policy.
A multistate effort by regulators led to settlements in which more than
$8.7 billion in life insurance proceeds was returned to U.S. consumers. And more than $3.25 billion was returned to individual states, where unclaimed-property programs continue efforts to locate and pay beneficiaries.
The National Association of Insurance Commissioners has its own Life Insurance Policy Locator Service, introduced in 2016.
The national tool so far has matched
21,530 policies with consumers – uncovering policies with a reported value of nearly $309.2 million.
And September happens to be life insurance awareness month.
How do you start looking for a lost life insurance policy?
❚ Dig for clues in the paperwork: What you want to find is any kind of paper trail that might uncover a lost or little-known insurance policy for a deceased loved one.
About 59 percent, or 192 million, of Americans have some type of life insurance, covered in either individual or group policies, according to LIMRA, which focuses on life insurance and retirement research. So the odds are fairly good that a loved one could have life insurance, even if you don’t realize it.
Try looking at bank statements or old canceled checks.
Look for paperwork in lock boxes or safety deposit boxes. Ask family mem- bers, financial advisers and insurance agents.
Are there any copies of applications for life insurance policies in files or drawers? An application for a life insurance policy would list other life insurance policies owned at the time of the application.
Review copies of the deceased’s tax returns for the past two years to spot any interest income or expense reported that relates to a life insurance policy.
Keep an eye on the mail. Look for premium notices or dividend notices in the mail for the year following the death of a policyholder.
If a policy is paid up, you won’t receive a bill for premiums. But the company might still send an annual notice or a notice of a dividend, according to the Insurance Information Institute.
Check with any former employers of the deceased.
❚ Do a free search of databases: Michigan offers its free Life Insurance Annuity Search Service through the state Department of Insurance and Financial Services to help locate a deceased family member’s life insurance policy or annuity contract that was purchased in Michigan. See www.michigan.gov/difs and search LIAS.
Consumers can do free searches via 29 state insurance departments. State insurance departments do not have records of specific insurance policies. But the departments can assist consumers in finding lost policies for the deceased. In Michigan, information from requests is regularly forwarded to insurers participating in the program.
The National Association of Insurance Commissioners, a group of state regulators, helps locate lost policies for those who believe they are beneficiaries, as well as executors, through its “Life Insurance Policy Locator.” See www.naic.org; click on “Consumers.”
❚ Check with the state’s Unclaimed Property Office: If a life insurance company knows an insured client has died but can’t find the beneficiary, the insurer must turn the death benefit over to the state where the policy was purchased. See the National Association of Unclaimed Property Administrators or www.unclaimed.org to do a search.